SUMMARY

The retirement funds provided mixed returns for periods ending December 31, 2005 and 2006. International equities, real estate, and private equity were among the better-performing asset classes. The most notable underperforming asset class was domestic equities. Our report includes a recommendation for the Investment Board to reassess its policies and procedures affecting the Variable Fund’s performance and acknowledges several changes the Board has made to address our past concerns with management of its private markets investments.